Investing in Women

Despite having more financial power than ever, women aren’t putting their money in the markets — and it’s costing them dearly. Sallie Krawcheck ’92, founder of Ellevest and author of Own It: The Power of Women at Work, is on a crusade to change that.

“Why is the time right to talk to women about taking charge of their investing?”

Sallie Krawcheck ’92 is sitting in the airy, loft-like headquarters of her fintech startup, Ellevest, in the Flatiron neighborhood of Manhattan. The investment professional, who has been named to both Forbes and Fortune magazines’ lists of “Most Powerful Women,” considers the question for a moment. “Why is the time right?” she repeats, her eyes brightening with intensity. “The time’s right because it’s always been right. It just hasn’t been on anyone’s radar screen.”

Krawcheck is on to something. As the former president of Global Wealth and Investment Management at Bank of America, former CEO and chairman of Citi Global Wealth Management, current chair of the professional women’s association Ellevate Network, and newly minted author of Own It: The Power of Women at Work (Crown Business, 2017), Krawcheck knows firsthand that the financial potential of women has never been stronger. According to multiple studies, women in the United States single-handedly control roughly $5 trillion in investable assets — jointly managing another $6 trillion with their spouses or partners — and account for 80 percent of consumer spending. They are as financially educated as their male counterparts, with 35 percent of American women passing a financial literacy assessment from the Center for Talent Innovation, compared with 39 percent of men. In fact, research suggests that women actually tend to be better than men at investing; a study by the University of California found that unmarried female investors outperformed unmarried male investors by 2.3 percent, female investment groups outperformed male groups by 4.6 percent, and women overall outperformed men by 1.4 percent.

“There’s a gender investment gap. It costs professional women tens of thousands, hundreds of thousands — in some cases, millions — of dollars over the course of their lives.”

In addition to having more financial muscle than ever, women also have more means to flex it, thanks to the many more career and lifestyle choices available to them today, Krawcheck adds. “We can now start our own companies to a greater degree. We can now have nonconventional and nontraditional career paths that just weren’t available to us [before],” she says. “We are at a really important point in time.”

You’d think that with these economic conditions, women would be flocking to the markets — but they aren’t. “There’s a gender investment gap,” says Krawcheck. “Nobody had even put those words together until just recently. [But] it costs professional women tens of thousands, hundreds of thousands — in some cases, millions — of dollars over the course of their lives. It’s a gender crisis.”

Indeed, a Center for Talent Innovation report co-authored by Andrea Turner Moffitt ’07, the center’s senior vice president, found that 53 percent of women in the United States do not have a financial advisor, with three-quarters of women under 40 reporting not having one. This is important because women without advisors typically keep 20 percent of their assets in cash, where it earns “close to zero” in annual returns, Krawcheck says, “as opposed to [in] the equity market, which historically has earned 9 percent, or [in] diversified investment portfolios, which earn about 6 percent.” It is no surprise that women retire with only about two-thirds the amount of money that men do, she adds.

Not actively investing doesn’t just spell lost opportunity for the financially secure or savvy among us, either. According to the National Resource Center on Women and Retirement Planning, up to 90 percent of all American women will be solely responsible for managing their money at some point in their lives. For some it’s a choice, but for many it’s a necessity — due to life circumstances such as divorce, illness, or simply age. (Consider that women live, on average, five to eight years longer than men do and make up 80 percent of nursing home residents and 75 percent of assisted-living residents.) In other words, all women have the potential to lose out by not investing.

“Everything about investing to women says, ‘Not for us.’”

So what’s the holdup? According to Krawcheck, it comes down to one major roadblock.

“The [financial] industry is 86 percent male, and the average age is the late 50s or early 60s,” she told a packed crowd one stormy January evening at the 92nd Street Y in Manhattan. “The language of investing is very sport-like: outperform, beat the market, pick a winner. The industry symbol is a bull: it’s a phallus symbol! If you’re a woman in her 30s or 40s, that doesn’t feel approachable. Everything about investing to women says, ‘Not for us.’” In fact, the same Center for Talent Innovation report found that despite their nearly equivalent financial literacy, women are 44 percent less likely than men to consider themselves knowledgeable about the market.

1. Sallie Krawcheck; 2. Center for Talent Innovation

Now, Krawcheck is focused on changing that. With Ellevest, which launched in May 2016, she created a platform that makes investing welcoming and accessible for women. Ellevest uses technology to create diversified financial portfolios that are specifically tailored to women’s unique needs, factoring in elements like longevity and salary fluctuations. The platform asks users to specify their goals in clear, comprehensible, and upbeat language, with options such as “Retirement on My Terms,” “A Place to Call Home” (home ownership), and “Kids Are Awesome” (having children).

“In order for women to be fully equal with men, we need to be financially equal with men,” Krawcheck says, stressing that this is important not just for financial security but for career opportunities and advancement. “I talk about investing as the best career advice women aren’t getting. Tell me: Are you more confident walking into your boss’s office to ask for the promotion, to ask for the new assignment, or to, you know, tell him to take this job and shove it and start your own business, if you ... have more money in the bank, or less money in the bank? Are you more confident in your life?”

Indeed, confidence can have a profound impact on a woman’s financial and professional life. In Own It, Krawcheck highlights how the lack of confidence — or, more accurately, the fear of failure—inhibits women from taking worthwhile risks both in the market and on the job.

“As women, we love to get As. [We say,] ‘I’m going to go home, I’m going to print out the prospectus, I’m going buy the investing book. As soon as I am ready to get my A, I will invest,’” she says. “The problem is, you’re never ready to get the A. You’re never going to know everything. Ever. If you’re waiting until you’ve got every last definition, you’re going to be waiting forever, and you’re going to cost yourself a lot of money.”

But failure is an inevitable part of success, Krawcheck stresses, and it’s critical for women and men alike to get comfortable with it. She knows a thing or two about this: In 2008, follow­ing the collapse of the markets, Krawcheck was publicly fired from Citigroup, where she’d held the role of CEO and chairman of Citi Global Wealth Management, running Smith Barney, Citi Private Bank, and Salomon Smith Barney equity research. Her firing was detailed on the front page of the Wall Street Journal.

“I tell you, you haven’t really failed till you’re right there in the news, front page,” she says, laughing. Krawcheck attributes her dismissal to a disagreement with her boss, the CEO of Citigroup at the time, about whether to reimburse clients for a now-worthless stock the company had invested them in prior to the crash. She argued for reimbursement, he against. Ultimately, Citi’s board voted to partially compensate the clients, and she lost her job a few months later.

Sallie Krawcheck’s best investing advice? “Keep it simple.”

“I really loved my job, and I didn’t want to leave my job,” she says. “It was a tough one. I lost a lot of weight. I drank a lot of wine. I had a global day of mourning for myself. [But failure] is not fatal. It’s just not fatal. Somehow, in our culture, we make it feel like you’re either a success or a failure, and that if you fail, that is it. And it’s just not true.”

Krawcheck points to research that shows that when a company makes a mistake and fixes it for a customer, the customer actually trusts the company more. “I think we can extend this to people,” she says. “Everybody loves a comeback. People will accept failure if you make it part of your story. You have to embrace it. And you have to tell them what you learned: ‘Here’s how I stumbled. Here’s what I learned. Here’s what’s different going forward.’ That tends to show people so much more about your character and your abilities as a businessperson. It makes you a better and better businessperson.”

This has certainly been true for Krawcheck. After rising to the rank of financial-services “superstar” — as dubbed by her friend Mellody Hobson, president of Ariel Investments and chair of the board of directors of DreamWorks Animation — Krawcheck is now conquering the entrepreneurial space with Ellevest, which has already raised $20 million in seed funding, including from the likes of tennis pro Venus Williams.

“In order for women to be fully equal with men, we need to be financially equal with men.”

“It is the most terrifying thing I’ve ever done,” Krawcheck told the 92nd Street Y crowd about starting her own business. “The personal responsibility is so great. [But] I wouldn’t be doing this if I didn’t really believe in it having real impact on the lives of women and their families.”

Ultimately, through all of her endeavors, Krawcheck hopes the message to women is clear: when it comes to investing, just do it. “Keep it simple. A diversified, low-cost investment portfolio — a little riskier if you’re younger, less risky if you’re older. Invest steadily. Go!”

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